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Friday, March 29, 2024

SCOTUS asked to address 'dangerous trend' by state attorneys general

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WASHINGTON (Legal Newsline) - Out of options after California’s highest court rejected its appeal, Johnson & Johnson has asked the U.S. Supreme Court to review a $344 million judgment based upon what it called unconstitutionally vague state consumer protection laws.

In July, the California Supreme Court refused to review the judgment based upon more than 100,000 purported violations of the state’s Unfair Competition Law and False Advertising Laws, which provide for up to a $2,500 penalty each. California Attorney General Rob Bonta claimed J&J flooded the state with misleading marketing materials intended to encourage women to receive surgical implants of its Ethicon pelvic mesh devices. 

In a petition with the U.S. Supreme Court, J&J said the whopping penalty reflected a “dangerous trend” in which state attorneys general – often in partnership with private lawyers – target companies with claims based on vague unfair and deceptive acts and practices (UDAP) laws that bypass traditional procedural protections. California pursued its claims on its own.

“Businesses have a right, at minimum, to notice of when their statements will trigger hundreds of millions of dollars in civil penalties, and predictability and consistency in how those penalties are applied,” J&J said in its Nov. 10 filing. Defendants “struggle to predict their exposure.”

The judgment drew criticism from the U.S. Chamber of Commerce, the American Tort Reform Association, the Washington Legal Foundation and medical groups.

The Supreme Court takes up only a tiny percentage of the cases requesting review each year, and earlier this year rejected a closely watched petition by Bayer AG over another blockbuster California judgment over Roundup weedkiller. Johnson & Johnson based its request on what it described as violations of its fundamental constitutional right to due process and fair notice of the penalties it might face if it violates California law.

The AG sued in 2016, claiming J&J violated state unfair trade and false advertising laws. The California laws, like statutes in many other states, assesses a penalty for “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Beyond that, they don’t specify what constitutes a violation, however. 

At trial, J&J called surgeons who testified they knew about the risks and the company’s statements were not deceptive. San Diego Superior Court Judge Eddie Sturgeon nevertheless held that Ethicon’s materials didn’t disclose the full severity of risks and were likely to deceive doctors. 

The judge counted every printed piece of information the state estimated to have reached California, regardless of whether they were delivered, read or relied upon by anyone, J&J said. The court estimated more than 50,000 pieces were shipped into the state between 2008 and 2011, for example, based on one sales representative’s ordering patterns that were extrapolated to the rest of the team statewide.

At the same time, Judge Sturgeon rejected California’s request for an injunction, worried that JNJ would withdraw its Ethicon products from the state. An appeals court largely upheld the verdict, except for violations based upon testimony about oral communications for which there was no direct evidence. The appeals court said proof that written materials actually reached consumers “would have been desirable,” but upheld violations over those anyway. 

In its petition for review, J&J said UDAP laws “transform what were previously ordinary product liability claims into massive claims that require no such individualized proof of injury or causation.”

“Using these broad UDAP statutes, states can extract hundreds of millions of dollars at a time from businesses,” the company said. Hawaii last year imposed an $834 million penalty against Bristol-Myers and Sanofi over their marketing of the blood thinner Plavix, for example. 

The Supreme Court has imposed struct scrutiny on laws clearly implicating the First Amendment right to free speech, J&J said, and regularly strikes down criminal laws as void for vagueness. But it hasn’t defined fair notice in other laws regulating marketing and other commercial communications. Laws like California’s allow AGs to penalize corporate speech without going through the strict review other speech-related laws undergo from the courts, the company said.

In support of its position, the company cited the 1972 Supreme Court decision in Grayned v. City of Rockford. “Because we assume that man is free to steer between lawful and unlawful conduct, we insist that laws give the person of ordinary intelligence a reasonable opportunity to know what is prohibited, so that he may act accordingly,” the court said in that case. 

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